Stock By The Dollar

What is a stock split?

A stock split divides up the company into more shares so each share is more affordable.

The overall company’s value doesn’t change, nor does the total dollar amount of stock you own.

Stock splits are decided by the company’s board of directors.

Owning 1 share of stock worth $50 is the same thing as owning 2 shares worth $25 a piece, right? A stock split divides the company into more shares so that each share is more affordable.

In a 2-for-1 stock split, the company doubles the number of shares and each one is worth half as much.

Apple did a 7-for-1 split in June 2014. Its stock was trading at about $645 per share before the split, which made it unaffordable for the average investor. After the split, the stock traded at about $92 per share, which made it more affordable for people to own Apple stock.

In fact, Apple has split its stock four times since its IPO in 1980:

7-for-1 in June 2014

2-for-1 in February 2005

2-for-1 in June 2000

2-for-1 in June 1987

To compare Apple’s stock price today with its stock price in the past, you need to account for these splits. Otherwise, it wouldn’t be a fair comparison. When Apple went public in 1980, its stock price was $22 a share. To compare that to today’s price, you need to divide by 56 to adjust for all the splits (2 x 2 x 2 x 7 = 56). $22 divided by 56 = 39 cents, which means a share worth $150 today would have cost only 39 cents back in 1980. Amazing, huh? That’s how well Apple stock has done over the years!